The LITRG is calling for a change to planned regulations to prevent carers being disadvantaged in the tax system when supporting adults who self fund their care.
Shared Lives carers support, in the carers’ own homes, adults who are unable to live alone due to some vulnerability. Carers who receive payment for their caring activities from local authorities, health service bodies or Shared Lives schemes (‘qualifying care receipts’) and no, or little, other income, can qualify for substantial tax exemptions on those payments. In addition, they are able to use very simplified income tax reporting and need to maintain only minimal records for tax purposes. The tax exemption is known as Qualifying Care Relief.
While historically payments to the carers were made by a local authority or health service body, because of changes to the way social care is funded and the sector is regulated, payments may now be made to the carers in different ways. Some adults may self-fund part of their care, for example from PIPs or Housing Benefit, and pay that sum directly to the carer. But payments made directly to the carer, even if so made in accordance with a regulated Shared Lives scheme, are currently ineligible for Qualifying Care Relief.
While LITRG welcomed the Autumn Budget announcement that such self-funded payments would become eligible for the relief, it says the draft regulations do not go far enough. The tax charity is disappointed that tax relief will still not be available where self-funded payments are made directly to the carer, but only where they are routed to the carer via the schemes, local authority or health service body. Instead, LITRG recommends that all payments made in accordance with authorised Shared Lives schemes should be recognised as qualifying care receipts and be eligible for tax relief, both to reflect normal practice under many such schemes, and also to take away the complications and potentially onerous obligations on carers to apportion the payments they receive to everyday household tasks.
LITRG Chair Anne Fairpo said:
“We recommend that the regulations be amended to state explicitly that all payments made in accordance with authorised Shared Lives schemes are recognised as qualifying care receipts, regardless of the actual payer. This would ensure carers would all be treated fairly, since in many cases they have no control over how payments are made to them. If carers have to maintain records of all household expenses and apportion them, this is a huge amount of work – the very work that Qualifying Care Relief is designed to stop.
“This is likely to be a growing unfairness because the way health and social care is changing means more of the people being cared for are being given the financial means to pay for their own care. Carers are performing the same function, regardless of how the payments are made to them.”
In a response to a consultation on the expansion of Qualifying Care Relief, LITRG said the proposed regulations do not take account of the current ways in which Shared Lives carers are paid. This is because nowadays payments are made in accordance with a Shares Lives scheme but not necessarily by the scheme. While HMRC appear to accept that some payments may be made directly to the carer, for example for accommodation (often paid from housing benefit) and for food and utilities (often paid from other state benefits), they insist that payments for care must come from the scheme, local authority or health service body.
Anne Fairpo said:
“In order to provide certainty to the carers, this interpretation of how other payments, other than for care, may be received should be included in the regulations. This would provide them with certainty that qualifying care relief would apply to that income.
“While it is certainly possible that the care payments could be routed via scheme providers in the future, inevitably this change will be time-consuming and potentially costly for the schemes who may have to administer changes to direct debits and reconcile significant numbers of receipts into their bank accounts.”
Shared Lives schemes are designed to support adults with learning disabilities, mental health problems, or other needs that make it harder for them to live on their own. The schemes match an adult who has care needs with an approved Shared Lives carer. These carers share their family and community life, and give care and support to the adult with care needs. Shared Lives schemes are available across the country and are an alternative to traditional kinds of care, such as care homes. The schemes are sometimes also known as adult placement schemes. There are approximately 60,000 shared lives carers in the UK, who are looking after adults in the carer’s own home and as part of the carer’s family.